C$3$: Discusson Mini Ethics Case

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Ethics and professional conduct in business

Joshua Thorp opened Laser Co$.$ on January $1,2013.$ At the end of the first year, the business needed additional funds. On behalf of Laser, Joshua applied to Vermont National Bank for a loan of $$500,000.$ Based on Laser financial statements, which had been prepared on a cash basis, the Vermont National Bank loan officer rejected the loan as too risky.

After receiving the rejection notice, Joshua instructed his accountant to prepare the financial statements on an accrual basis. These statements included $$90,000$ in accounts receivable and $$35,000$ in accounts payable. Joshua then instructed his accountant to record an additional $$25,000$ of accounts receivable for commissions on the property for which a contract had been signed on December $28,2013.$ The title to the property is to transfer on January $5,2014,$ when an attorney formally records the transfer of the property to the buyer. Joshua then applied for a $$500,000$ loan from NYC Bank, using the revised financial statements. On this application, Joshua indicated that he had not previously been rejected for credit.

Discuss the ethical and professional conduct of Joshua Thorp in applying for the loan from NYC Bank.